9911796707
TMI BlogUnlocking Trade Potential & Understanding Cumulation in Rules of Origin for IndiaX X X X Extracts X X X X X X X X Extracts X X X X ..... Unlocking Trade Potential & Understanding Cumulation in Rules of Origin for India - By: - DrJoshua Ebenezer - Customs - Import - Export - SEZ - Dated:- 15-1-2025 - In the ever-changing landscape of global trade, Rules of Origin (RoO) are central to determining the eligibility of goods for preferential treatment under trade agreements. Cumulation, a mechanism within RoO, allows inputs from multipl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e countries to be treated as originating from one country, subject to certain conditions. This is particularly important for Indian businesses navigating Free Trade Agreements (FTAs), as it creates global competitiveness by reducing costs and encouraging supply chain integration. Let s delve deeper into cumulation and how Indian businesses can leverage it, supported by FTA provisions and landmark ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case laws. What is Cumulation? Cumulation enables producers to combine inputs from partner countries without losing preferential status for the final product. Depending on the nature of the agreement, cumulation is classified into three types: 1. Bilateral Cumulation This applies between two countries in a trade agreement. For instance, under the India-UAE Comprehensive Economic Partnership Agreem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent (CEPA), an Indian exporter of garments can use fabric sourced from the UAE and still meet the RoO criteria for preferential tariffs. Article 3.4 of the India-UAE CEPA specifically mentions cumulation for goods that undergo minimal transformation in either party s territory. 2. Diagonal Cumulation Diagonal cumulation involves three or more countries in a regional trade framework. For instance, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under the SAARC Preferential Trading Arrangement (SAPTA), goods produced in India using inputs from Bangladesh can qualify for preferential treatment when exported to Bhutan. Article 7(2) of SAPTA specifies that inputs from participating countries can be treated as originating goods. Indian textile exporters often rely on Bangladeshi raw materials and claim preferential treatment in third-country ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... markets like Nepal. 3. Full Cumulation Full cumulation allows all production processes in participating countries within a trade agreement to be treated cumulatively, where raw materials or processing activities from all partner countries under the same Rules of Origin framework can be combined to meet origin requirements. This is particularly significant for regions with integrated manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hubs. Why Cumulation Matters for India Cumulation offers significant advantages to India in its journey to become a global trade powerhouse. Cumulation strengthens India's participation in regional trade by integrating supply chains with neighboring countries. Agreements like the South Asian Free Trade Area (SAFTA) and the proposed BIMSTEC FTA provide avenues to boost exports by leveraging reg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional resources. Article 5 of SAFTA allows for diagonal cumulation among members, fostering regional trade integration. With over 15 FTAs in force, including agreements with ASEAN, Japan, and Australia, India can utilize cumulation to reduce costs and diversify sourcing options. Article 4.1 of the India-Japan CEPA provides cumulation benefits for goods meeting value addition thresholds in either c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ountry. Cumulation allows MSMEs to source cheaper inputs from partner countries, lowering production costs and enhancing global competitiveness. For instance, Indian manufacturers can import components from ASEAN countries under preferential terms and re-export them as finished goods. An Indian SME manufacturing electrical equipment can source components from Malaysia and claim benefits under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ASEAN-India FTA. Cumulation enables Indian exporters to compete globally by optimizing their supply chains. By sourcing intermediate goods under preferential tariffs, exporters can deliver cost-efficient products to markets like the EU and US. Challenges in Implementing Cumulation Cumulation requires robust documentation, including origin certificates and invoices, to establish compliance. The pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cess can be cumbersome, especially for MSMEs lacking resources. Many businesses remain unaware of the benefits of cumulation. Capacity-building initiatives are essential to bridge this knowledge gap. Differing technical standards and RoO requirements across partner countries often complicate cumulation. Streamlined customs processes and advanced origin verification systems are prerequisites for ef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fective cumulation. Strategies for Indian Businesses Exporters should familiarize themselves with FTA provisions and cumulation rules. Training sessions organized by industry bodies like CII, FFFAI,WTI, FIEO and ASSOCHAM can be instrumental. Adopting blockchain-based traceability systems can simplify origin verification and enhance compliance. Close collaboration with customs authorities and polic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ymakers can address procedural bottlenecks. Businesses should strategically utilize cumulation provisions to source inputs and expand market access Cumulation under RoO is not merely a technical provision it is a gateway to unlocking India s trade potential. For Indian businesses, especially MSMEs, leveraging cumulation can significantly reduce costs, enhance competitiveness, and foster regional i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntegration. Policymakers and trade bodies must work together to simplify compliance processes, raise awareness, and build infrastructure to maximize the benefits of cumulation. As India strives to strengthen its position in global trade, the effective use of cumulation can serve as a critical enabler, aligning with the nation s vision of becoming a global manufacturing and export leader. Share you ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r feedback [email protected] - Scholarly articles for knowledge sharing authors experts professionals Tax Management India - taxmanagementindia - taxmanagement - taxmanagementindia.com - TMI - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
